December 26th, 2013
The proposed hikes to guaranty fees for Fannie Mae and Freddie Mac will not be coming as soon as previously supposed.
U.S. Rep. Mel Watt, D-N.C., incoming director of the U.S. Federal Housing Finance Agency, announced in an email to reporters that he would delay the g-fee increase until he has had the opportunity to assess how effective the fee hike would be. A formal announcement will come after Watt is sworn in, “until such time as [he has] had the opportunity to evaluate fully the rationale for the plan and the plan’s impact.”
The 10-basis-point hike was proposed by former FHFA Acting Director Edward DeMarco as another step toward dialing back the presence of the two government-sponsored enterprises in the housing market. Government housing regulators have been working out strategic and gradual means of moving housing finance away from the GSEs and putting more of the burden on private lenders. Thus far, the subject has been a hot-button issue, as some fear such moves will hurt the pace of mortgage lending because private lenders will seek to lower their risk.
The g-fee hike would impact those who do not have good credit standing or a sizeable down payment: Two factors that usually push homebuyers toward a Fannie or Freddie mortgage.
Other factors impacting homebuyers
In addition to fee increases, consumers and lenders have been apprehensive about the coming implementation of Qualified Mortgage rules. The regulations, which are meant to provide risk protection for both parties as well as the housing market overall, have been seen as another threat to the ease of buying a home. Some predict that lenders will only offer QMs, making it harder for many to get a home loan.
The U.S. Federal Reserve recently announced that it would begin tapering its monthly bond-buying program from $85 billion per month down to $75 billion per month in January. The long-awaited announcement came with positive news and challenges for homebuyers: The Fed believes that the economy is strong enough to continue the housing recovery without stimulus and average mortgage rates will rise as a result of tapering, possibly as high as 5 percent.
With the combination of these factors, it is not surprising that Watt would want to take some time evaluate the g-fee hike, especially given that high-profile housing and credit associations – including the National Association of Federal Credit Unions, according to HousingWire – have seen the increase as a detriment to the mortgage industry.